DOCSLIB.ORG

Zbwleibniz-Informationszentrum

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Zbwleibniz-Informationszentrum A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Leijonhufvud, Axel Working Paper Hicks on time and money Diskussionsbeiträge - Serie A, No. 182 Provided in Cooperation with: Department of Economics, University of Konstanz Suggested Citation: Leijonhufvud, Axel (1984) : Hicks on time and money, Diskussionsbeiträge - Serie A, No. 182, Universität Konstanz, Fakultät für Wirtschaftswissenschaften und Statistik, Konstanz This Version is available at: http://hdl.handle.net/10419/75126 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Universitat Konstanz A Fakultat fiir Wirtschaftswissenschaften und Statistik AxeljJ_eijonhufvud Hicks On Time And Money Diskussionsbeitrage Postfach 5560 SerieA— Nr. 182 D-7750 Konstanz Mai 1984 •i JUL1 19B'i HICKS ON TIME AND MONEY Axel jLeijonhufvud * Serie A - Nr. 182 Mai 1984 •Member (1983-1984), Institute for Advanced Study, Princeton. Professor of Economics, University of California, Los Angeles Standiger Gastprofessor, Universitat Konstanz. •'* Serie A: Volkswirtschaftliche Beitrage Serie B: Finanzwissenschaftliche Arbeitspapiere Serie C: Betriebswirtschaftliche Beitrage My assignment is Hicks and Keynes. It is too large for a paper: Modern macroeconomic theory has been shaped to an extraordinary degree by these two men. I .will con-fine my discussion of Hicks's role to two related themes: Time and Money. Even within these boundaries, the fallowing attempt at an 1 interpretation cannot be definitive. Among the several reasons •for this, one is germane: I know that I will learn more -from Sir John Hicks in the future. But I cannot know exactly what I will learn newt time I sit down to read or reread him. Hence today's assessment cannot be my "optimal" or final one. Rather than commit myself fully, I should retain a measure of "flexibility." In certain types of situations, it is rational to commit oneself fully or contingently. In others, where the future contingencies cannot be enumerated or their nature anticipated, one should retain flexibility. One difference between neoclassical and Keynesian theory is that the former tends to exclude, whereas the latter must include, situations of the 3 second sort. The younger Hicks is remembered for his contributions to neoclassical economics; over the years the elder Hicks has become more insistently Keynesian in this particular sense. "Every economist is familiar with the accomplishments of Hicks the Younger, whether he has read him or not. That brilliant young man was supremely successful — by reformulating utility theory, by simplifying monetary theory, by interpreting Keynes and the Glassies, and by reviving general equilibrium theory — in constructing the molds into which 40 years of subsequent 4 theoretical developments were to be cast." It is helpful to try to see the young Hicks in historical context. What went on at the London School in the early thirties appears in retrospect almost as important as what was going on in Cambridge. At LSE, the world of Anglo-American economics was being won over from the tradition of Ricardo and Marshall to modern neoclassical economics—or, in the terms of Hicks the Elder, from "plutology" to "catallactics." If Cambridge was sufficient unto its British self, Lionel Rob'bins's London School encouraged the study of the Austrian and the Lausanne schools, of the Americans and the Swedes. ("We were such 'good Europeans' in 5 London that it was Cambridge that seemed 'foreign'.") Robbins brought Hayek to London and assembled a stable of superbly talented junior people: R.6.D. Allen, Marian Bowley, John Hicks and Ursula Webb-Hicks, Nicholas Kaldor, Abba Lerner, ^'era. Smith- Lutz, Richard Sayers and G.L.S. Shackle. Most importantly, Robbins wrote the programmatic tract that, highly controversial in its time, has long since permeated the teaching of economics to the point where its main message has become a platitude (thus depriving its author o-f the Nobel Prize?) His Nature and of Economic Science argued the "scarcity" definition of economics, a definition that fundamentally changed both the scope and the content of Marshall's subject. Robbins made rational means-ends calculation the core of economics. v It was the younger Hicks that demonstrated how this Robbins program could be realized. The Hicks-Allen "Reconsideration* recast demand theory in terms of rational decision theory. Hicks's simplification of monetary theory drew Money into the orbit of marginalist calculation. "Taking step after step along a road which seemed pre-ordained as soon as one had taken the first step" in a few years time led to the 'static' parts (Chapters I- 6 VIII). of Va^ue and Capital.. These were the parts of Hicks's early work that, together with "Keynes and the Classics", were to have such a profound and pervasive influence on how economics was to be taught in the United States in the era when American economics was becoming strongly predominant. Perhaps it is more accurate to say that these parts of Hicks's work were selected by the generation of American economists led by .Paul Samuel son that were reerecting the structure of economic theory using constrained optimization building blocks. Pure decision theory, formalized as optimization subject to constraints, is essentially timeless. The choice among the 7 foreseen outcome's of alternative actions is a purely logical calculus that does not involve time in any essential way. Thus was created a durable tension between neo-Walrasian microtheory and Keynesian macrotheory that, decades later, was to culminate in crisis. This could hardly have been foreseen. As Robert Clower has 8 remarked, ... it was only natural for economists generally to proceed on the presumption that general equilibrium theory had no inherent limitations.... That any even moderately "general" economic model should Cbe incapable of representing Keynesian processes]...would hardly occur naturally to any but a very perverse mind. That the elaborate Neo-Walrasian model set out in Hicks' Val_ye and Capital, might fail tin this respect] would have seemed correspondingly incredible to any sensible person at the outset of the Neo-Walrasian Revolution. The younger Hicks knew that Time was a problem. We find him wrestling with it in almost all the parts of his early work that did not become part of the American neoclassical canon. It was to become even more of a preoccupation — an unfashionable preoccupation — for Hicks the Elder. From the first, it seems, Hicks saw it as a supreme theoretical challenge, deserving the most sustained effort, to find a mode of process analysis that would retain a role for equilibrium constructions without denying ', (or trivializing) change. In the early going, this amounted to finding a workable way between Walras and Pareto, on the one hand, and Knight and 9 Hayek on the other. Thirty or forty years later, the opposed alternatives — Arrow-Debreu vs. Shackle or Lachmann —_^ clearer and also further apart. Shackle poses the issue with uncompromising force: "... the theoretician is confronted with a 10 stark choice. He can reject rationality or time." The American Neo-Walrasians, from Paul Samuel son to Robert Lucas, have not seen this choice as at all difficult. In general, they have simply gone whole hog for Rationality, letting Time and Change be trampled underfoot in the philosophical muck as unfit food for economic thought. If forced (somehow) to choose, -it is possible that Hicks the Younger might also have opted for rational allocation theory; Hicks the Elder almost certainly would opt for economic history. In actuality, Hicks fought fifty years to maintain a conceptual middle ground. The issue may have come into focus at LSE precisely because all of the neoclassical schools were to some extent cultivated in the circle around Robbins and Hayek. Marshall had been aware of 11 the problem and had devised a method that at least partly evaded it. Hayek had worked on the construction of an equilibrium process "in time" and had found himself forced back onto 'perfect 12 foresight' assumptions. Robbins had drawn the conclusion that "(t)he main postulate of the theory of dynamics is the fact that 13 we are not certain regarding future scarcities." As matters stood around 1930, the static toolbox of economic theory was strictly applicable only to stationary, perfect foresight processes. It was not at all clear that economic theory provided any foundation for the disciplined analysis of monetary questions or business cycles. Hicks's earliest work dramatized the predicament. In particular, his remarkable 1933 paper on 14 "Equilibrium and the Cycle" drove home a point made by Knight: that in a perfect foresight equilibrium process, people would not demand cash-balances. This spelled trouble for the most sophisticated cycle theory available at the time. What became of Hayek's notion of "neutral money" as a criterion for maintaining macroeconomic equilibrium, if in equilibrium there could be no place for money, "neutral" or otherwise? The Swedish followers of Wicksell had run into similar quandaries and it was from Myrdal and Lindahl that Hicks got help 15 with the next step.
Load more

Recommended publications
  • Aggregate Comparative Statics
    This article appeared in a journal published by Elsevier. The attached copy is furnished to the author for internal non-commercial research and education use, including for instruction at the authors institution and sharing with colleagues. Other uses, including reproduction and distribution, or selling or licensing copies, or posting to personal, institutional or third party websites are prohibited. In most cases authors are permitted to post their version of the article (e.g. in Word or Tex form) to their personal website or institutional repository. Authors requiring further information regarding Elsevier’s archiving and manuscript policies are encouraged to visit: http://www.elsevier.com/authorsrights Author's personal copy Games and Economic Behavior 81 (2013) 27–49 Contents lists available at SciVerse ScienceDirect Games and Economic Behavior www.elsevier.com/locate/geb Aggregate comparative statics ✩ ∗ Daron Acemoglu a, , Martin Kaae Jensen b a Department of Economics, Massachusetts Institute of Technology, United States b Department of Economics, University of Birmingham, United Kingdom article info abstract Article history: In aggregative games, each player’s payoff depends on her own actions and an aggregate of Received 31 August 2011 the actions of all the players. Many common games in industrial organization, political Available online 23 April 2013 economy, public economics, and macroeconomics can be cast as aggregative games. This paper provides a general and tractable framework for comparative static results in JEL classification: aggregative games. We focus on two classes of games: (1) aggregative games with strategic C60 C72 substitutes and (2) nice aggregative games, where payoff functions are continuous and concave in own strategies.
    [Show full text]
  • Digitalisation and Monetary Policy
    Does the liquidity trap exist? Lhuissier, Mojon and Rubio-Ramirez AEA Congress, 4 January 2021 The views expressed here are mine and should not be attributed to the BIS Restricted “A liquidity trap may be defined as a situation in which conventional monetary policies have become impotent, because nominal interest rates are at or near zero: injecting monetary base into the economy has no effect, because base and bonds are viewed by the private sector as perfect substitutes” Paul Krugman (1998) Restricted 2 Outline 1. Motivation 2. Literature 3. Empirical analysis 4. Results 5. Discussion Restricted 3 1. Motivation: How low can long-term rates be? Central bank balance sheets1 Share of government bonds held by central banks2 % of GDP % of GDP % Restricted 4 1. Motivation: Is there a lack of monetary policy space? • Cutting down short rates and purchasing assets to cut long rates can go only so far and • the lack of “interest rate” space is very critical in several advanced economies • However, into the medium we still need to assess whether and how much MP can do when short-term rates are near the ZLB/ELB Restricted 5 Literature: The ZLB makes MP ineffective Japan . Krugman (1998) – Coenen and Wieland (2003) “John Hicks, in introducing both the IS-LM model and the liquidity trap, identified the assumption that monetary policy is ineffective, rather than the assumed downward inflexibility of prices, as the central difference between Mr. Keynes and the classics.” US and EA, before the facts . Early Fed attemps: Furher and Madigan (97); Orphanides and Williams & Reifschneider and Williams (2000) .
    [Show full text]
  • Edward S. Shaw* Simon Kuznets Remarked in His Capital in The
    Edward S. Shaw* Simon Kuznets remarked in his Capital in rate. There is physical wealth, its ownership The American Economy, " ... extrapolation of represented by an homogeneous financial asset inflationary pressures over the next thirty in the form of common stock or "equity," and years raises a specter of intolerable conse­ there is wealth in the form of real money bal­ quences.... "1 Fifteen of the thirty years are ances. Accumulation of physical and monetary over, and inflation has accelerated. The central wealth derives from a constant rate of saving concern of this paper is whether Kuznets' pre­ for the community. Inflation occurs because the diction of "intolerable consequences" for capital growth rate of nominal money exceeds the markets and capital accumulation is on track or growth rate of real money demanded. patently wrong. 2 The inflation is immaculate because its pace Monetary theory distinguishes between "im­ is constant and perfectly foreseen and because maculate" inflation, "clean" inflation, and the inflation tax on real money balances is com­ "dirty" inflation. It is the last of these that pensated precisely by a deposit-rate of interest Kuznets dreaded and that we have endured. The on money. It is fully anticipated, and it does not first section below deals very briefly with dif­ impose a relative penalty on the money form of ferences between the three styles of inflation. wealth. Money-wage rates rise faster than out­ The second section is a catalogue of ways in put prices in the degree that labor productivity which dirty inflation may obstruct and distort is growing.
    [Show full text]
  • The 2016 NEA Jazz Masters Tribute Concert Honoring the 2016 National Endowment for the Arts Jazz Masters
    04-04 NEA Jazz Master Tribute_WPAS 3/25/16 11:58 AM Page 1 The John F. Kennedy Center for the Performing Arts DAVID M. RUBENSTEIN , Chairman DEBORAH F. RUTTER , President CONCERT HALL Monday Evening, April 4, 2016, at 8:00 The Kennedy Center and the National Endowment for the Arts present The 2016 NEA Jazz Masters Tribute Concert Honoring the 2016 National Endowment for the Arts Jazz Masters GARY BURTON WENDY OXENHORN PHAROAH SANDERS ARCHIE SHEPP Jason Moran is the Kennedy Center’s Artistic Director for Jazz. WPFW 89.3 FM is a media partner of Kennedy Center Jazz. Patrons are requested to turn off cell phones and other electronic devices during performances. The taking of photographs and the use of recording equipment are not allowed in this auditorium. 04-04 NEA Jazz Master Tribute_WPAS 3/25/16 11:58 AM Page 2 2016 NEA JAZZ MASTERS TRIBUTE CONCERT Hosted by JASON MORAN, pianist and Kennedy Center artistic director for jazz With remarks from JANE CHU, chairman of the NEA DEBORAH F. RUTTER, president of the Kennedy Center THE 2016 NEA JAZZ MASTERS Performances by NEA JAZZ MASTERS: CHICK COREA, piano JIMMY HEATH, saxophone RANDY WESTON, piano SPECIAL GUESTS AMBROSE AKINMUSIRE, trumpeter LAKECIA BENJAMIN, saxophonist BILLY HARPER, saxophonist STEFON HARRIS, vibraphonist JUSTIN KAUFLIN, pianist RUDRESH MAHANTHAPPA, saxophonist PEDRITO MARTINEZ, percussionist JASON MORAN, pianist DAVID MURRAY, saxophonist LINDA OH, bassist KARRIEM RIGGINS, drummer and DJ ROSWELL RUDD, trombonist CATHERINE RUSSELL, vocalist 04-04 NEA Jazz Master Tribute_WPAS
    [Show full text]
  • Rese4b Instituti
    RESE4B INSTITUTI The International Food Policy Research Institute was established in 1975 to identify and analyze alternative national and international strategies and policies for meeting food needs of the developing world on a sustainable basis, with particular emphasis on low- income countries and on the poorer groups in those countries. While the research effort is geared to the precise objective of contributing to the reduction of hunger and malnutrition, the factors involved are many and wide-ranging, requiring analysis of under lying processes and extending beyond a narrowly defined food sector. The Institute's research program reflects worldwide collaboration with governments and private and public institutions interested in in creasing food production and improving the equity of its distribution. Research results are disseminated to policymakers, opinion formers, administrators, policy analysts, researchers, and others concerned with na tional and international food and agricultural policy. IFPRI is a member of the Consultative Group on Inter national Agricultural Research and receives support from a number of governments, multilateral organiza tions, foundations, and other sources. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE IFPRI REPORT 1993 CONTENTS Introduction: The Year in Review Per Pinstrup-Andersen Research Results 1 1 Environment and Production Technology Division 15 Markets and Structural Studies Division 19 Food Consumption and Nutrition Division 23 Trade and Macroeconomics Division Outreach 25 Outreach Division 29 Collaboration 33 Publications and Papers 43 Personnel 47 Financial Statements BOARD OF TRUSTEES Gerry Helleiner, Chairman James Charles Ingram Professor of Economics Director University of Toronto The Australian Institute of Toronto, Canada International Affairs Canberra, Australia Sjarifuddin Baharsjah Junior Minister Dharma Kumar Ministry of Agriculture Professor of Economic History Jakarta, Indonesia Delhi School of Economics New Delhi, India David E.
    [Show full text]
  • Neoclassicism and the Separation of Ownership and Control
    University of Pennsylvania Carey Law School Penn Law: Legal Scholarship Repository Faculty Scholarship at Penn Law 2009 Neoclassicism and the Separation of Ownership and Control Herbert J. Hovenkamp University of Pennsylvania Carey Law School Follow this and additional works at: https://scholarship.law.upenn.edu/faculty_scholarship Part of the Business Organizations Law Commons, Corporate Finance Commons, Economic History Commons, Economic Theory Commons, Industrial Organization Commons, Law and Economics Commons, Legal History Commons, and the Securities Law Commons Repository Citation Hovenkamp, Herbert J., "Neoclassicism and the Separation of Ownership and Control" (2009). Faculty Scholarship at Penn Law. 1792. https://scholarship.law.upenn.edu/faculty_scholarship/1792 This Article is brought to you for free and open access by Penn Law: Legal Scholarship Repository. It has been accepted for inclusion in Faculty Scholarship at Penn Law by an authorized administrator of Penn Law: Legal Scholarship Repository. For more information, please contact [email protected]. VIRGINIA LAW & BUSINESS REVIEW VOLUME 4 FALL 2009 NUMBER 2 NEOCLASSICISM AND THE SEPARATION OF OWNERSHIP AND CONTROL Herbert Hovenkamp† INTRODUCTION ...................................................................................................... 374 I. FISHER’S SEPARATION THEOREM ................................................................... 383 II. VALUE MAXIMIZATION AND THE NATURE OF THE FIRM ....................... 286 III. THE FINANCIAL STRUCTURE AND VALUE
    [Show full text]
  • 10-25-13 Jazz Ensemble
    Williams College Department of Music Williams Jazz Ensemble Kris Allen, Director Introduction: Smile Please - Stevie Wonder, arranged by Kris Allen Young up- and -coming composers and arrangers of the New York scene: After the Morning - John Hicks, arranged by David Gibson Arabia - Curtis Fuller, arranged by Chris Casey Noctilucent Shift - Sara Jacovino Small Combo: Passion Dance - McCoy Tyner Jonathan Dely '15, trumpet; Taylor Halperin '14, piano; Greg Ferland '16, bass; Brian Levine '16, drums Coached by Avery Sharpe My Funny Valentine - Richard Rogers and Lorenz Hart, arranged by Max Seigel SKJ Blues - Milt Jackson, arranged by James Burton Going Somewhere - James Burton Saxophones Trumpets Rhythm Nikki Caravelli '16 Richard Whitney '16 Nathaniel Vilas '17 - piano Max Dietrick '16 Jonathan Dely '15 Austin Paul '16 - vibraphone Jackson Myers '17 Will Hayes '14 Jack Schweighauser '15 - guitar Samantha Polsky '17 Byron Perpetua '14 Greg Ferland '16 - bass Sammi Jo Stone '17 Paul Heggeseth Brian Levine '16 - drumset Trombones Hartley Greenwald '16 Jeff Sload '17 Allen Davis '14 Nico Ekasumara '14 Friday, October 25, 2013 8:00 p.m. Chapin Hall Williamstown, Massachusetts Please turn off cell phones. No photography or recording is permitted. Upcoming Events: See music.williams.edu for full details and additional happenings as well as to sign up for the weekly e-newsletters. 10/27 3:00pm Visiting Artists Freddie Bryant & Shubhendra Rao Brooks-Rogers Recital Hall 10/29 4:15pm Master Class with Visiting Artist Jonathan Biss, piano Chapin Hall
    [Show full text]
  • Conditional Comparative Statics
    Conditional Comparative Statics James A. Robinsony Ragnar Torvikz August 15, 2010 Abstract Why was the Black Death followed by the decline of serfdom in Western Europe but its’ intensi…cation in Eastern Europe? What explains why involvement in Atlantic trade in the Early Modern pe- riod was positively correlated with economic growth in Britain but negatively correlated in Spain? Why did frontier expansion in the 19th Century Americas go along with economic growth in the United States and economic decline in Latin America? Why do natural re- source booms seem to stimulate growth in some countries, but lead to a ‘curse’in others, and why does foreign aid sometimes seem to encour- age, other times impede economic growth? In this paper we argue that the response of economies to shocks or innovations in economic oppor- tunities depends on the nature of institutions. When institutions are strong, new opportunities or windfalls can have positive e¤ects. But when institutions are weak they can have negative e¤ects. We present a simple model to illustrate how comparative statics are conditional on the nature of institutions and show how this perspective helps to unify a large number of historical episodes and empirical studies. Keywords: JEL: Paper prepared for the 2010 World Congress of the Econometic Society. We are grateful to Marco Battaglini for his incisive comments. yHarvard University, Department of Government and Institute for Quanti- tative Social Science, 1737 Cambridge St., Cambridge MA02138. E-mail: [email protected]. zNorwegian University of Science and Technology, Department of Economics, Dragvoll, N-7491 Trondheim, Norway.
    [Show full text]
  • CR Traverse Analysis Progenitors & Pioneers
    Traverse Analysis: Progenitors and Pioneers 14th History of Economic Thought Society of Australia Conference The University of Tasmania, Hobart, Australia. 11th July 2001 Colin Richardson* School of Economics University of Tasmania ABSTRACT Traverse analysis has two progenitors (David Ricardo, Karl Marx) and five pioneers: Michal Kalecki, Adolph Lowe, Joan Robinson, J.R. Hicks, and John Hicks. Defined as the dynamic disequilibrium adjustment-path that connects an initial with a different terminal state of economic growth, the traverse comes in four “flavours”. There are neoclassical (J.R. Hicks), neo-Austrian (John Hicks), observed (Ricardo, Marx, Kalecki, Robinson), and instrumental (Lowe) traverses. These terms are explained and the seven seminal contributions are summarised and commented upon in this paper. * I am indebted to Dr Jerry Courvisanos for his supervision and comments in writing this paper. Scholarship support from The University of Tasmania is also gratefully acknowledged. 2 Introduction Nobel laureate economist Robert Solow once quipped: “The traverse is the easiest part of skiing but the most difficult part of economics”. Later, Joseph Halevi and Peter Kriesler (1992, p 225) complained that “The traverse is at the same time one of the most important concepts in economic theory, and also one of the most neglected.” This paper outlines briefly the history of economic thought between 1821 and 1973 concerning this difficult, important and neglected theoretical construct. Traverse analysis has two progenitors (David Ricardo, Karl Marx) and five pioneers: Michal Kalecki, Adolph Lowe, Joan Robinson, J.R. Hicks, and John Hicks. Defined as the dynamic disequilibrium adjustment-path that connects an initial with a different terminal state of economic growth, the traverse comes in four “flavours”.
    [Show full text]
  • Unemployment Did Not Rise During the Great Depression—Rather, People Took Long Vacations
    Working Paper No. 652 The Dismal State of Macroeconomics and the Opportunity for a New Beginning by L. Randall Wray Levy Economics Institute of Bard College March 2011 The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. Levy Economics Institute P.O. Box 5000 Annandale-on-Hudson, NY 12504-5000 http://www.levyinstitute.org Copyright © Levy Economics Institute 2011 All rights reserved ABSTRACT The Queen of England famously asked her economic advisers why none of them had seen “it” (the global financial crisis) coming. Obviously, the answer is complex, but it must include reference to the evolution of macroeconomic theory over the postwar period— from the “Age of Keynes,” through the Friedmanian era and the return of Neoclassical economics in a particularly extreme form, and, finally, on to the New Monetary Consensus, with a new version of fine-tuning. The story cannot leave out the parallel developments in finance theory—with its efficient markets hypothesis—and in approaches to regulation and supervision of financial institutions. This paper critically examines these developments and returns to the earlier Keynesian tradition to see what was left out of postwar macro.
    [Show full text]
  • Robust Comparative Statics  Susan Athey, Paul Milgrom, and John Roberts
    Robust Comparative Statics Susan Athey, Paul Milgrom, and John Roberts DRAFT ONLY - DO NOT CITE OR CIRCULATE Comments Welcome This Draft: October, 1998 OUTLINE Chapter 0: Introduction. Part I: Univariate Optimization Problems Chapter 1: An Introduction to the Theory. Chapter 2: Single Variable Problems with Separable Contexts. Chapter 3: Single Variable Problems with non-Separable Contexts. Part II: Multivariate Optimization Problems. Chapter 4: Multivariate Comparative Statics on Product Sets. Chapter 5: Elementary Lattice Theory and Comparative Statics on Lattices. Part III: Stochastic Optimization Problems. Chapter 6: Supermodularity and monotonicity. Chapter 7: Log-Supermodularity. Chapter 8: Single Crossing Properties. Part IV: Equilibrium Models. Chapter 9: One dimensional models. Chapter 10: Multidimensional models. Chapter 11: Conclusion. 2 0 Introduction This monograph describes a new approach to comparative statics analysis that has developed rapidly in the past several years. Comparative statics – the study of how the solutions of an economic model change as the model parameters and specification are changed – is important because (1) most of the testable predictions of economic theory are comparative statics predictions and (2) many economic equilibrium analyses are built from comparative statics analyses of the model’s components. The results of comparative statics analyses thus form the basis for much of our understanding of the behavior of the economy. Comparative statics predictions can be qualitative or quantitative, but the focus of the new methods is on the former. Typical examples of qualitative predictions include assertions that increasing employment taxes or a minimum wage will increase unemployment, or that relaxing trade restrictions will cause industrial pollution to fall in developed countries and rise in less developed ones.
    [Show full text]
  • The Neo-Chartalist Approach to Money by L. Randall Wray
    The Neo-Chartalist Approach to Money by L. Randall Wray* Working Paper No. 10 July 2000 ∗ Senior Research Associate, Center for Full Employment and Price Stability, University of Missouri-Kansas City In his interesting and important chapter, Charles Goodhart makes three main contributions. First, he argues that there are two competing approaches to the study of money, with one dominating most research and policy formation to the virtual exclusion of the other. Second, he examines and rejects Mundel’s Optimal Currency Area approach, which is based on the dominant approach to money, leading to a criticism of the theoretical basis for European Monetary Union. Finally, he introduces some historical literature on the origins of coins and money that is not familiar to most economists, and that seems to conflict with the dominant approach to money. This chapter will focus primarily on what Goodhart identifies as the neglected “cartalist”, or “chartalist” approach to money, with a brief analysis of the historical evidence and only a passing reference to the critique of Mundel’s theory. I. The Orthodox, M-form, Approach Goodhart calls the orthodox approach the M-form, for Metalist. This is so dominant that it scarcely needs any exposition, however it will be useful to briefly outline its main features in order to contrast them with the “Chartalist” or C-form theory later. I still think the Metalist approach is best summarized in a quote from Samuelson I like to use. Inconvenient as barter obviously is, it represents a great step forward from a state of self-sufficiency in which every man had to be a jack-of-all-trades and master of none….If we were to construct history along hypothetical, logical lines, we should naturally follow the age of barter by the age of commodity money.
    [Show full text]